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HB 1035

Income Tax - Subtraction Modification - Overtime Compensation

2026 Regular Session Introduced by Lauren Arikan and 6 co-sponsors

Maryland bill modifies income tax code to exclude or reduce taxation on overtime compensation, lowering taxes for workers earning overtime pay.

Hearing 2/26 at 1:00 p.m.
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WeVote Research Nonpartisan
Bill Summary · HB 1035

Legislative bill overview

HB 1035 modifies Maryland's income tax code by adjusting the subtraction modification for overtime compensation. The bill appears to create or expand a tax deduction or exclusion related to overtime pay that workers receive. This would reduce taxable income for employees who earn overtime, effectively lowering their state income tax liability.

Why is this important

Overtime compensation represents a significant portion of income for many working Marylanders, particularly in manufacturing, healthcare, hospitality, and emergency services. Tax relief targeting overtime could provide meaningful financial relief to workers while potentially affecting state revenue and tax competitiveness. This touches on how Maryland structures its tax burden relative to neighboring states and its impact on working-class households.

Potential points of contention

  • Revenue impact: Reducing taxable overtime income decreases state tax revenue, requiring either offsetting tax increases elsewhere, spending cuts, or acceptance of higher deficits
  • Fairness questions: Whether overtime workers deserve preferential tax treatment compared to salaried employees earning equivalent total compensation, and whether this benefits higher earners disproportionately
  • Economic effects: Unclear whether tax relief for overtime actually incentivizes work, reduces business labor costs, or primarily benefits those already working significant overtime hours

Compiled from official sources — confirm details with the bill’s official record.

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